WASHINGTON — Federal Home Loan Bank Board member Lee Henkel defended himself Wednesday against conflict-of-interest allegations stemming from a proposal he made last month that apparently would have helped an Irvine-based savings institution with which he once had business dealings.
Henkel contended that he made the proposal--which failed to receive support from the other two bank board members--in an effort to solve a problem affecting dozens of institutions. He said it was not intended to benefit just Lincoln Savings & Loan, which made $61.9 million in loans to corporations and partnerships in which Henkel had an interest.
"My motives were absolutely clear," Henkel told a group of reporters, saying his proposal was designed "to solve something (that) was a general problem of the industry."
He said it would be "ludicrous" to believe he was just "trying to do a favor for a friend" by presenting at a public meeting his plan to relax a 2-year-old rule on direct investments by S&Ls.
Named in November
Henkel, an Atlanta lawyer and real estate developer, was appointed by President Reagan in November to the powerful three-member board that regulates the savings and loan industry.
The controversy threatens to derail Henkel's confirmation by the Senate, particularly because he is under attack by Sen. William Proxmire (D-Wis.), the new head of the Senate Banking Committee.
Proxmire has asked the Justice Department to investigate whether Henkel has violated any laws in connection with the proposal. Because he was appointed while Congress was not in session, Henkel is allowed to serve on the board without confirmation until his appointment is considered.
Henkel also appears to be at odds with board chairman Edwin J. Gray, who favors stricter regulation of the industry than Henkel.
The allegations of conflict of interest arise because Lincoln Savings is embroiled in a fight with the board over whether it exceeded federal limits on direct investments. Henkel's wide-ranging proposal, among other things, would have settled the dispute in Lincoln's favor.
But Henkel, who openly acknowledges his past ties with Lincoln, said he was unaware of the specific dispute between Lincoln and the board and that he had no discussions with anyone from Lincoln before he presented his plan.
He also pointed out that he has put all his holdings in a blind trust, and that he has agreed not to make decisions on matters directly affecting institutions with which he has dealt in the past.
Critics say Henkel should not have become involved in the issue because his proposal would have directly helped Lincoln, which is run by Charles H. Keating Jr., who has been involved in a highly publicized dispute with Gray over the direct investment controversy.
Henkel defended his actions on the grounds that the proposal dealt with a general policy issue that studies indicate immediately affects at least 109 savings institutions and may affect as many as 270 S&Ls with at least $15 billion in investments at stake in the matter.
If it turns out that Lincoln is one of the few S&Ls that would gain from his proposal, Henkel said, he would withdraw the plan.